Tax Type
Retail Sales and Use Tax
Description
Call center in Virginia; Right to control
Topic
Collection of Tax
Taxability of Persons and Transactions
Date Issued
10-20-2000
October 20, 2000
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in response to your letter requesting a ruling on the application of the retail sales and use tax to your client located outside Virginia (the "Taxpayer"). I apologize for the delay in responding your letter. Copies of cited sources are enclosed.
FACTS
You indicate the Taxpayer has no physical presence in Virginia. The Taxpayer sells tangible personal property to Virginia customers. Orders may be placed via telephone, catalog or website. Distribution and call center services are handled by an unrelated third party fulfillment service provider located outside Virginia. Products and catalogs are shipped from an out-of-state distribution center to customers via common carrier or the United States mail. The Taxpayer indicates that the third party fulfillment service provider does not solicit orders, but merely accepts orders.
The third party fulfillment service provider has notified the Taxpayer that it intends to reroute the calls to a new call center located within Virginia. You ask if the use of a call center in Virginia by the third party fulfillment service provider will give the Taxpayer sufficient activity within Virginia to require it to register for the collection and remittance of the Virginia retail sales and use tax.
RULING
Code of Virginia § 58.1-612 lists several definitions of the term "dealer." Pursuant to subsection B(2) of this statute, the term "dealer" includes any person who "imports or causes to be imported into this Commonwealth tangible personal property from any state or foreign country, for sale at retail, for use, consumption, or distribution, or for storage to be used or consumed in this Commonwealth." Based on the facts presented, the Taxpayer qualifies as a "dealer" under this definition.
Pursuant to Code of Virginia § 58.1-612(C)(1), a dealer as so defined will be deemed to have sufficient activity within Virginia to require registration under § 58.1-613 if the dealer "maintains or has within this Commonwealth, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature." (Emphasis added.)
Title 23 of the Virginia Administrative Code (VAC) 10-210-2070 is instructive to the issue raised. Subsection B of this regulation defines a "place of business" to include, but is not limited to, "a store, a sales or other office or any warehouse." In subsection C, this regulation provides the following:
An out-of-state dealer who has a place of business in Virginia is required to register as a dealer at that place. If the same dealer, at a place of business outside this state, receives orders from Virginia customers directly or not through a place of business in Virginia, he must also register as an out-of-state dealer.
Public Document (P.D.) 99-94 (4/30/99), explains the two factors necessary for an agency relationship to be established. First, the agent must be subject to the principal's control, with regard to the work to be done and the manner of performing it. Actual control is not the test; it is the right to control that is determinative. Second, the work has to be done on the business of the principal or for his benefit.
In this case, the facts presented are not sufficient to determine if an agency relationship exists between the Taxpayer and the third party fulfillment service provider. Clearly, the work of the third party fulfillment service provider is for the benefit of the Taxpayer. The question to be addressed is the Taxpayer's right to control the work of the third party fulfillment service provider. The Taxpayer will be deemed to have sufficient activity in Virginia to require registration for the collection of sales tax if it has the right to control the work to be done by the third party fulfillment service provider and the manner in which the work is performed.
For your convenience, I have enclosed a registration application (Form R-1) for your client to complete and return to the department. If you have any questions about this ruling, please contact * * * in the * * * department's Office of Tax Policy at * * *
Danny M. Payne
Tax Commissioner
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in response to your letter requesting a ruling on the application of the retail sales and use tax to your client located outside Virginia (the "Taxpayer"). I apologize for the delay in responding your letter. Copies of cited sources are enclosed.
FACTS
You indicate the Taxpayer has no physical presence in Virginia. The Taxpayer sells tangible personal property to Virginia customers. Orders may be placed via telephone, catalog or website. Distribution and call center services are handled by an unrelated third party fulfillment service provider located outside Virginia. Products and catalogs are shipped from an out-of-state distribution center to customers via common carrier or the United States mail. The Taxpayer indicates that the third party fulfillment service provider does not solicit orders, but merely accepts orders.
The third party fulfillment service provider has notified the Taxpayer that it intends to reroute the calls to a new call center located within Virginia. You ask if the use of a call center in Virginia by the third party fulfillment service provider will give the Taxpayer sufficient activity within Virginia to require it to register for the collection and remittance of the Virginia retail sales and use tax.
RULING
Code of Virginia § 58.1-612 lists several definitions of the term "dealer." Pursuant to subsection B(2) of this statute, the term "dealer" includes any person who "imports or causes to be imported into this Commonwealth tangible personal property from any state or foreign country, for sale at retail, for use, consumption, or distribution, or for storage to be used or consumed in this Commonwealth." Based on the facts presented, the Taxpayer qualifies as a "dealer" under this definition.
Pursuant to Code of Virginia § 58.1-612(C)(1), a dealer as so defined will be deemed to have sufficient activity within Virginia to require registration under § 58.1-613 if the dealer "maintains or has within this Commonwealth, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature." (Emphasis added.)
Title 23 of the Virginia Administrative Code (VAC) 10-210-2070 is instructive to the issue raised. Subsection B of this regulation defines a "place of business" to include, but is not limited to, "a store, a sales or other office or any warehouse." In subsection C, this regulation provides the following:
An out-of-state dealer who has a place of business in Virginia is required to register as a dealer at that place. If the same dealer, at a place of business outside this state, receives orders from Virginia customers directly or not through a place of business in Virginia, he must also register as an out-of-state dealer.
Public Document (P.D.) 99-94 (4/30/99), explains the two factors necessary for an agency relationship to be established. First, the agent must be subject to the principal's control, with regard to the work to be done and the manner of performing it. Actual control is not the test; it is the right to control that is determinative. Second, the work has to be done on the business of the principal or for his benefit.
In this case, the facts presented are not sufficient to determine if an agency relationship exists between the Taxpayer and the third party fulfillment service provider. Clearly, the work of the third party fulfillment service provider is for the benefit of the Taxpayer. The question to be addressed is the Taxpayer's right to control the work of the third party fulfillment service provider. The Taxpayer will be deemed to have sufficient activity in Virginia to require registration for the collection of sales tax if it has the right to control the work to be done by the third party fulfillment service provider and the manner in which the work is performed.
For your convenience, I have enclosed a registration application (Form R-1) for your client to complete and return to the department. If you have any questions about this ruling, please contact * * * in the * * * department's Office of Tax Policy at * * *
Danny M. Payne
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner